DuPont Shareholder Sues Board Over $1 Billion Court Loss

By Steven Church and Phil Milford -
Jan 17, 2013

A DuPont Co. (DD) shareholder sued
company directors and Chief Executive Officer Ellen Kullman,
claiming mismanagement of the seed business led to a $1 billion
judgment that threatens to wipe out the company’s cash.

In a complaint filed yesterday in U.S. District Court in
Wilmington, Delaware, shareholder Robert Zomolosky asked a judge
to force Kullman and the board to pay any damages stemming from
DuPont’s loss of a patent lawsuit involving Monsanto Co. (MON)’s weed
killer, Roundup. The jury award, the third-biggest last year,
could grow to $3 billion depending on future legal rulings,
according to the lawsuit.

“The DuPont board lost sight of its mandate and its
responsibilities, and acquiesced in unlawful legal maneuvers and
deceptive public statements in conscious disregard of its
obligations,” Zomolosky claimed in the complaint.

The patent case grew out of the company’s effort to compete
with Monsanto’s Roundup Ready crop business, which held 90
percent of the market for soybean and cotton seeds as of 2008,
according to the lawsuit. Because DuPont’s research wasn’t
producing results, company managers used Monsanto’s technology
to try to create seeds that could resist Roundup, a key
requirement for farmers, Zomolosky claims.

Appeal Planned

The Wilmington, Delaware-based company plans to appeal the
jury’s verdict, according to the complaint, and has asked the
judge to overturn the award.

DuPont’s General Counsel Thomas L. Sager said in an e-
mailed statement that the company handled the Monsanto patent
case appropriately.

“We are confident in the appropriateness of all our
actions and the points raised in this lawsuit are simply a
repetition of those we have repeatedly addressed in the course
of the Monsanto litigation,” Sager said.

Monsanto sued in 2009 and won its case in August when a
federal jury in St. Louis, where Monsanto is based, ruled
against DuPont.

During that patent lawsuit, U.S. District Judge Richard Webber ruled that DuPont “knowingly perpetrated a fraud against
the court,” by lying in court and to investors about its right
to use Monsanto’s seed technology.

DuPont falsely claimed that it acted within the terms of a
2002 licensing contract, and continued to publicly state that
position even after it was precluded from making such arguments
to the jury, Webber said.

The shareholder complaint, filed on behalf of the company
as a so-called derivative lawsuit, seeks a jury trial, corporate
governance improvements and unspecified damages from directors.

The lawsuit also says DuPont’s board “took no known
actions against any of the malefactors,” wrongly gave Kullman a
pay raise, and “has failed to enact a meaningful ‘clawback
policy’” to recover its money.

The case is Zomolosky v. Kullman, 13-cv-00094, U.S.
District Court, District of Delaware (Wilmington).